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This document covers alternative costing techniques such as joint product costing, throughput accounting, and environmental management accounting (EMA), explaining their significance in decision-making. It explores methods for allocating joint costs, optimizing bottleneck resources, and integrating environmental costs into financial strategies. Each section includes key formulas, practical applications, and test exercises to reinforce learning.
Used when a different approach better suits the product or service.
Helps organizations gain a better understanding of their cost structure.
Leads to improved decision-making.
Applicable when multiple products are produced from a single process (e.g., petrol, diesel).
Joint products: Have high enough value to be considered main products.
By-products: Have significantly lower value.
The split-off point is where products separate.
Joint costs: Costs incurred before the split-off point.
Common cost apportionment methods:
Physical measurement
Market value
Net realizable value
Defines throughput as revenue minus direct material costs.
Assumes all costs, except direct materials, are fixed.
Key formula: Profit = Throughput Contribution – Operating Expenses
Focuses on maximizing throughput while minimizing investment costs.
Addresses bottleneck resources, optimizing production constraints.
Tracks environmentally related costs for better corporate performance.
Environmental impact awareness
Customer concerns
Legislative requirements
Cost savings & sustainability
Prevention Costs: e.g., protective gear
Appraisal Costs: e.g., inspection checks
Internal Failure Costs: e.g., waste disposal
External Failure Costs: e.g., carbon emissions impact
Activity-Based Accounting: Links environmental costs to their drivers.
Input/Output Analysis: Compares material inputs against outputs and waste.
Each section includes examples and test exercises to reinforce the concepts. Let me know if you need a more detailed explanation on any part!
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